Overview of Doing Business in India

by Poorvi Chothani, Esq. LawQuest

www.lawquestinternational.com

July 8, 2010

LawQuest 2010. All Rights are Reserved.

India Demographics
Total Population: 1,189,172,906 (July 2011 est. CIA World Factbook) Age Structure:
0-14 years: 29.7% (male 187,450,635/female 165,415,758) 15-64 years: 64.9% (male 398,757,331/female 372,719,379) 65 years and over: 5.5% (male 30,831,190/female 33,998,613) (2011 est.)

Median Age: 26.2 years Population Growth Rate: 1.344% (2011 est.) Birth Rate: 20.97 births/1,000 population (2011 est.) Death Rate: 7.48 deaths/1,000 population (July 2011 est.) Literacy Rate: 61% Percent of the Population under the Poverty Line: 25% (2007 est.) Unemployment Rate: 10.8% (2010 est.) Net Migration Rate: -0.05 migrant(s)/1,000 population (2011 est.) Sex ratio:
at birth: 1.12 male(s)/female under 15 years: 1.13 male(s)/female 15-64 years: 1.07 male(s)/female 65 years and over: 0.91 male(s)/female

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India Demographics
(Remarkably Diverse)

Second-most populous country in the world with over 1.18 billion people (estimate for April, 2011 ) consisting of more than one-sixth of the world's population Contributes 17.31% of the world's population and is projected to be the largest populated country by 2025 surpassing China, and by 2050 it will have over 1.6 billion people Occupies 2.4% of the world's land area and supports over 17.5% of the world's population.

As per the 2001 census, 72.2% of the population lives in about 638,000 villages and the remaining 27.8% lives in more than 5,100 towns and over 380 urban agglomerations.

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India An Overview
Judicial and Governance Systems Demographics
Large, Young Population Growing Middle Class Increasing Wealth

Protectionist Environment
Labor Laws

Problem Areas
Bureaucratic hurdles Weak Infrastructure Judicial Delays Diverse and Fragmented Markets

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Entry Options
Liaison Office/Representative Office Branch Office Project Office Company Agent Distributor Franchise Indirect Investments

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Company Structure in India

Private Limited Company Minimum two shareholders and two directors Minimum Capital USD 2500 Public Company 7 members and 3 directors Minimum Capital USD 12500 Indian director and shareholder not mandatory

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Foreign Direct Investment

Prohibited Sectors
multi-brand retail trading, atomic energy and agriculture

Sectors subject to cap Examples

Telecommunication upto 49%, Insurance upto 26%

Automatic Route
Post Facto intimation to Reserve Bank of India (RBI)

Special Economic Zones (SEZ)

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FDI Inflows into India

Cumulative Amount Of FDI Flows Into India (from April 2000 to April 2011) - US$ 1,97,935 million
(Equity inflows + including data on Re-invested earnings & Other capital, which is available from April 2000 onwards. These are the estimates on an average basis, based upon data for the previous two years, published by RBI in Monthly Bulletin dt: 10.06.2011)

Cumulative Amount of FDI Equity Inflows (from from April 2000 to April 2011) - US$ 1,32,837 million - (excluding, amount remitted through RBIs-NRI Schemes)
Note : FDI inflows do not include data on Re-invested earnings & Other capital, as company-wise details are not maintained by RBI.

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Critical Issues in Foreign Investments

Minority shareholder protection
Minority holding at least 10% - right to statutory action against majority shareholder for oppression and mismanagement

Some special rights holding 26%

amendment of charter documents issue of shares other than in accordance with pre-emptive rights reduction of share capital buyback of shares by the company making inter-corporate loans or investments or providing guaranties or other securities beyond certain thresholds

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Critical Issues in Foreign Investments

Shareholders Agreements Liability of Board of Directors Employment Laws Disputes Resolution IP Protection Tax

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Emerging Business Opportunities

Innovative companies Technology companies Clinical research Business and knowledge support services Infrastructure related companies Health care Education Transport Energy Retail IT Construction Insurance

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Ease of Doing Business

Starting a Business 29 days Dealing with construction permits Employing workers Registering property Getting credit Protecting investors Paying taxes Trading across borders Enforcing contracts Closing a business Other parameters

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Stepwise Procedures to Start a Business

No 1 2 3 Procedure Obtain director identification number (DIN) on-line Obtain digital signature certificate on-line Reserve the company name with the Registrar of Companies (ROC) on-line Time to Complete 1 day 1-6 days 2-3 days Associated Costs INR 100 INR 400 to INR 2650 INR 500

4
5 6

Pay stamp duties online, file all incorporation forms and documents online and obtain the certificate of incorporation
Make a seal Visit an authorized franchise or agent appointed by National Securities Depository Services Limited (NSDL) or Unit Trust of India (UTI) Investors Services Ltd to obtain a Permanent Account Number (PAN) Obtain a tax account number for income taxes deducted at source from the Assessing Office in the Mumbai Income Tax Department Register with Office of Inspector, Mumbai Shops and Establishment Act

3-7 days
1 day 7 days

INR 18,789
INR 350 INR 94 for Fee and INR 5 for Application Form, (if not downloaded) INR 60 INR 2,000 (registration fee) + 3 times registration fee for Trade Refuse Charges (INR 6,000) INR 500 (Registration Fee) + INR 25 (Stamp Duty) for compulsory VAT registration no charge no charge no charge

7 8

7 days, simultaneously with Procedure 6 2 days, simultaneous with procedure 7 10 days, simultaneous with procedure 8 2 days, simultaneous with procedure 9 12 days, simultaneous with procedure 10 9 day, simultaneous with procedure 10

Register for VAT online

10 11 12

Register for profession tax Register with Employees' Provident Fund Organization Register for medical insurance (ESIC)

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Some Noteworthy Entrepreneurs

Alok Kejriwal Contests2win.com Games2win.com GangofGamers.com Chimpoo.com Media2win INVIZIADS Koimoi Game Wok Mobile2win (India) Mobile2win (China) Devang Shah and Gaurang Shah Signage Networks India

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LawQuests Areas of Practice

Foreign Direct Investment Foreign Indirect Investment Company and Commercial Transactions Real Estate Private Clients Intellectual Property Employment Law Global Business Migration

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